DTE Energy Company

Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to DTE Energy Q3 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Matt Kopinski, Director of Investor Relations. You may.

Thank you and good morning, everyone. Before we get started, I'd like to remind you to read the Safe Harbor Statement on page 2 of the presentation, including the reference to forward-looking statements. Our presentation also includes references to operating earnings, which is a non-GAAP financial measure. please refer to the reconciliation of gap earnings to operating earnings provided in the appendix. With us this morning are Joy Harris, President and CEO, and Dave Rude, CFO. And now I'll turn it over to Joy to start our call this morning.

Thanks, Matt. Good morning, everyone, and thank you for joining us. While this is my first time leading our earnings call as CEO, I've had the privilege of engaging with many of you over the past couple of years and appreciate the dialogues. I'm off to a running start and continuing to build on the strong foundation we've established. I have a number of exciting updates to share with you today, which include highlighting the progress we're making on achieving our 2025 financial goals, providing a strong 2026 operating EPS outlook, and outlining our enhanced five-year plan that now extends through 2030. A highlight of our strategy is the transformational growth we're seeing in data center demand. I am pleased to announce we finalized an agreement with a leading hyperscaler to support 1.4 gigawatts of data center load. This is an exciting milestone that I'll expand on as we walk through our updated strategic plan. Aside from the 1.4 gigawatts of new load, We are still in late stage negotiations with an additional three gigawatts of data center load, providing potential further upside to our capital plan as we advance these negotiations. As a result of this first data center transaction and continued need to modernize our utility assets, our updated plan includes significant increases in utility investments for our customers and delivers six to 8% operating EPS growth through 2030. We are confident we will reach the high end of our targeted range in each year driven by RNG tax credits and the flexibility they provide. This plan supports our continued strategic shift toward higher quality utility earnings fueled by increased demand, continues our efforts to build the grid of the future while transitioning to cleaner generation, and demonstrates our ongoing commitment to affordability for our customers. I will share additional details of our plan over the next few slides. Dave will give an overview of our third quarter results, 2025 guidance and 2026 early outlook, and then we will open it up for your questions. I'll start on slide four by saying that we are continuing to deliver strong results in 2025. and we are well positioned to hit the high end of the guidance this year. As always, our success is a testament to our dedicated and engaged team committed to serving our customers and communities. I am extremely proud that our team was recognized by the Gallup Organization for the 13th consecutive year with a Great Workplace Award And our employee engagement ranks in the 94th percentile globally among thousands of organizations. We are well positioned to achieve the high end of our 2025 operating EPS guidance range. Looking ahead to 2026, our early outlook reflects operating EPS growth of 6% to 8% over our 2025 guidance midpoints. and we are confident in our ability to deliver at the higher end of that range. Let me move to slide five to provide more details on our long-term plan. We are in an exciting time for our industry and for DTE, and we are focused on seizing the opportunity to deliver for our customers, communities, and investors. We're increasing our five-year capital investment plan by $6.5 billion compared to the prior plan, driven by the data center transaction and the continued need to modernize our utility assets. At DTE Electric, the additional investments are strategically focused to support data center low growth, advanced cleaner generation, and to enhance distribution infrastructure that will drive continued improvements in reliability. DTE Gas is focused on system reliability and infrastructure renewal, ensuring safe, efficient service for our customers while modernizing our network. CD Advantage will continue to prioritize investments in utility-like long-term fixed fee contracted projects, which aligns well with our strategy to deliver stable, predictable earnings for our investors. Our investment plan supports a further strategic shift toward higher quality utility earnings over the next five years, targeting utility operating earnings to increase to 93% of our overall earnings by 2030. Importantly, data center opportunities are helping drive this shift as we allocate additional capital to serve this load, which further supports affordability for our existing customers. We have incorporated a more conservative growth outlook for DTE Vantage, which is largely influenced by commodity pricing assumptions in our longer-term forecast. As part of our most recent strategic analysis, we evaluated a range of pathways to drive sustainable long-term value. This effort reinforced our conviction that leaning into our core utility business while taking a more conservative view at DTE Vantage will best position us to deliver value for our customers and for our investors. As you can see in the appendix of this presentation, the 2030 outlook for Vantage is flat to 2025 guidance as our solid project development pipeline offsets the expected roll-off of 45V production tax credits after 2029. We're confident this approach also positions us well for consistent future growth as we expect to continue to make progress on additional data center opportunities that will deliver upside to our base plan. Let me move to slide six to highlight updates to our capital plan at DTE Electric. Our updated capital investment plan at DTE Electric provides a $6 billion increase over the prior plan, driven by the data center transaction and customer-focused initiatives that align with our long-term strategy. A key component of this plan is new storage investment to support the increased data center load. Importantly, this incremental storage investment is fully funded by the data center customer. The plan also includes renewable investments that support the continued success of our Migraine Power Voluntary Renewables Program and fulfill the requirements of the Legislative Clean Energy Plan. And to ensure reliable baseload generation as we transition away from coal, we are planning the construction of a combined cycle gas turbine to replace our retiring coal plant. We are submitting a competitive bid for the 2026 Integrated Resource Plan All Source RFP for a new CCGT to replace Monroe Power Plant. We're also continuing to invest in distribution infrastructure to harden the grid and improve reliability for our customers. These grid investments are already delivering results, driving a nearly 90% improvement in the duration of outages since 2023 as we make strong progress toward our goal of reducing power outages by 30% and cutting outage time in half by 2029. Our current rate case filing supports these reliability investments while remaining focused on customer affordability. This filing includes a request for approximately $1 billion in distribution spending to be included in the infrastructure recovery mechanism by 2029, which was largely supported by the NPSC staff in its recent testimony. The IRM will help drive consistent, predictable investments in grid modernization to improve reliability for our customers while also simplifying future regulatory proceedings. The order for this case is expected at the end of February. Overall, I'm thrilled about the opportunities ahead for DTE Electric as we continue our efforts to improve reliability for our customers, transition to cleaner generation, and execute on economic development opportunities to drive low growth and support affordability for our customers. Let me move to slide seven to provide an update on our advancement of data center opportunities. As I mentioned, we successfully executed a significant agreement to support 1.4 gigawatts of new data center load, representing a major step forward in our utility growth strategy, while also delivering meaningful affordability benefits to our existing customers. The demand is expected to ramp up over the next two to three years, giving us a clear runway to align infrastructure development and resource planning with customer needs. While we can use existing capacity to support this ramp, we'll also need to invest in new energy storage solutions to meet the full capacity requirements. Our updated plan includes nearly $2 billion of incremental energy storage investment and additional tolling agreements to support this data center load. Given our excess capacity, we will use our existing industrial tariff for this customer and combine it with an energy storage contract to support the incremental storage investment. We are including key terms in these agreements that will protect existing customers, including a 19 year power supply contract with minimum monthly charges. The data center will fund its own storage needs through a 15 year energy storage contract. These terms are important to us and our customers as we ensure the data center revenue support the required investments to meet this new demand. We plan to submit our regulatory filing tomorrow requesting approval of the data center contract. Energy storage investments will begin ramping in 2026 to align with the projected increase in data center load. As I mentioned, we also have additional data center opportunities beyond this initial 1.4 gigawatts. We are in advanced discussions with additional hyperscalers for over 3 gigawatts of new load, and we have a pipeline of an additional 3 to 4 gigawatts behind that. We also expect longer-term growth opportunities through the expansion of these initial hyperscaler projects. The generation investments that will be needed to support these additional opportunities could very well come into the back end of our five-year plan, providing incremental capital investments above what we are laying out for you today. A key step in preparing for the development of new generation to support large data center loads is integrating these requirements into our next IRP filing, which we expect to file next year. So a lot of great opportunities ahead of us on the data center front. We will continue to provide updates along the way as things progress. Let me move to slide eight to discuss our commitment to customer affordability. We have a history of executing on our investment plan with a sharp focus on customer affordability. As you can see on the chart, our average annual bill increase over the last four years is significantly lower than the national average and Great Lakes average. We remain committed to maintaining this focus on affordability throughout our plan. We are advancing on a number of initiatives to support affordability for our customers while continuing to invest and support our key priorities. Importantly, near-term data center growth will help create substantial affordability headroom for our existing customers as we sell our excess generation. Our continuous improvement culture will ensure O&M and capital investments remain efficient. The shift from coal to natural gas and renewables also helps to further reduce O&M costs, while our diverse energy mix ensures economic fuel costs for our customers. And finally, the IRA provisions support the renewable energy investments while supporting customer affordability goals. So to wrap up my comments, I'll say I'm very excited about our long-term plan and the opportunities we have ahead of us to continue to deliver for all of our stakeholders, including excellent service to our customers and communities, and continued strong financial performance for our investors. I'm looking forward to spending more time with many of you at EEI to discuss our updated plan. With that, I'll hand it over to Dave. Over to you, Dave.